Shein, the fast fashion company founded in China and now headquartered in Singapore, is scaling back its Vietnam operations and again concentrating on its supply chain in China. The move follows a year-long effort to build Vietnam as an alternative production and logistics base, which was disrupted by changes in US customs policy.
Shein initially rented about 15 hectares of warehouse space near Ho Chi Minh City — roughly the size of 21 football pitches — and encouraged large Chinese suppliers to establish production facilities in Vietnam. After just over a year, the leased area has been reduced to 6 hectares. Layoffs have begun, with some teams reportedly shrinking to a quarter of their original headcount, even as the facility initially provided jobs for thousands.
Why Vietnam lost its appeal
The most important reason behind Shein's Vietnam investment was the US-China trade war. The company's business model relies on shipping low-priced products in small packages to customers worldwide, a model that benefited from a long-standing US regulation allowing shipments worth under $800 to enter duty-free. This exemption particularly boosted the cost advantage of Shein and similar e-commerce platforms.
The duty-free advantage was first removed for low-value shipments from China, making Vietnam attractive as a way to circumvent rising US tariffs. However, Washington later suspended the exemption for all countries, eliminating one of the main benefits of moving to Vietnam. At the same time, some of the very high US tariffs on Chinese products fell, narrowing the cost gap between the two countries.
Speed and flexibility trump low wages
Beyond trade policy, Shein's production system — built on speed and small batches — proved difficult to replicate outside China. Chinese suppliers can produce millions of different products in extremely small batches and deliver them within days. In Shein's model, a product that gains attention online is reordered quickly, while items without demand are dropped, avoiding large inventory costs. In Vietnam, this flexibility was hard to achieve: workers willing to toil long hours for low pay were scarce, and production efficiency lagged China's.
Some Chinese suppliers who had moved to Vietnam are now returning to production areas around Guangzhou, the heart of Shein's model. There, thousands of small textile producers operate in close proximity, enabling even tiny orders to enter production rapidly. Shein plans to invest more than 10 billion yuan (about $1.5 billion) in a smart supply chain system in the Guangdong region.
Shein's US revenue fell 14 percent in the first quarter of the year.
The company's US revenue fell by 14 percent in the first quarter of this year. Some Chinese suppliers, squeezed by low profit margins, are reportedly starting to work with other platforms, and the growth of rivals such as Temu and Amazon is giving manufacturers more options. Shein had previously floated plans to source more from countries like Turkey and Brazil as it expanded its production network.
Global implications
The outcome of the Vietnam experiment carries lessons beyond Shein, including for Turkey. Global brands make production decisions based not only on labor costs but also on delivery time, responsiveness to small orders, logistics infrastructure, customs advantages, and supplier proximity. Turkey offers a speed advantage in textiles due to its proximity to Europe but still faces cost competition with China and Southeast Asia.
Shein's reversal in Vietnam is one of the latest examples showing that global production will not shift unilaterally away from China. US customs decisions that changed in less than a year demonstrate that billion-dollar supply chain investments now hinge not just on production costs but also on the speed of political decisions. For Shein, the advantage of maintaining a Vietnamese export base is no longer as large as it once was — reinforcing that, for now, there's no place like China.
